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India Pharmaceuticals
2Q Preview – Last Modest
Quarter Before Earnings
Ramp
Quick Comment – We expect F2Q12 results to be
unexciting, on lack of major product launches (esp in the
US) and tough comps (Ranb’s forex income, Sun’s
residual Eloxatin etc last year). We estimate 11%, 13%
and (9.5)% sales, operating profits and net profit yoy
growth for the sector for 2Q. Excluding Ranb, we expect
12%, 13% and 5% growth, respectively. From here on,
we expect meaningful sequential improvement in sector
earnings in ensuing quarters, driven by new launches
(Zyprexa, Lipitor subject to FDA clearance, Seroquel,
Plavix, Geodon, OCs, fonda ramp up etc), some
operating leverage (such as scale up in Cipla’s Indore
SEZ) and forex benefits (lower INR versus USD).
Company wise commentary – Sun should benefit from
continuing improvement in Taro and Cipla should benefit
from Indore SEZ and forex (low hedging policy). We
expect modest quarter from Lupin (ex Medicis payment),
Glaxo (domestic market slowdown) and DRRD (poor
fonda ramp up in US, 10% market share). Biocon will
report off a high base due to Axicorp exclusion.
What to watch out for – 1) Ranb’s comments on
FDA/DoJ resolution and Lipitor launch prospects. Given
the absence of ftfs, Ranb results should give perspective
on the strength of its base business. 2) Sun’s execution
on its lofty 28-30% sales growth guidance for F12. 3)
Cipla’s scale up of Indore SEZ and EU inhaler update. 4)
DRRD’s progress in EMs (esp India and Russia), US
pipeline and F13 guidance. 5) While INR has sharply
depreciated by 9.5% (versus USD) during the quarter to
Rs48.97; the AVERAGE qoq depreciation is just 2.4%
(Exhibit 9); implying that the real benefit of forex
(adjusted for hedges) will be felt in the Dec’11 quarter.
Our pecking order in the sector remains unchanged
– DRRD, Lupin, Sun and Ranb (all OW). We retain EW
on Cipla, GSK and Biocon. The sector is trading at 20x
and 16.5x F12 and F13 EPSe (20% EPS CAGR).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Pharmaceuticals
2Q Preview – Last Modest
Quarter Before Earnings
Ramp
Quick Comment – We expect F2Q12 results to be
unexciting, on lack of major product launches (esp in the
US) and tough comps (Ranb’s forex income, Sun’s
residual Eloxatin etc last year). We estimate 11%, 13%
and (9.5)% sales, operating profits and net profit yoy
growth for the sector for 2Q. Excluding Ranb, we expect
12%, 13% and 5% growth, respectively. From here on,
we expect meaningful sequential improvement in sector
earnings in ensuing quarters, driven by new launches
(Zyprexa, Lipitor subject to FDA clearance, Seroquel,
Plavix, Geodon, OCs, fonda ramp up etc), some
operating leverage (such as scale up in Cipla’s Indore
SEZ) and forex benefits (lower INR versus USD).
Company wise commentary – Sun should benefit from
continuing improvement in Taro and Cipla should benefit
from Indore SEZ and forex (low hedging policy). We
expect modest quarter from Lupin (ex Medicis payment),
Glaxo (domestic market slowdown) and DRRD (poor
fonda ramp up in US, 10% market share). Biocon will
report off a high base due to Axicorp exclusion.
What to watch out for – 1) Ranb’s comments on
FDA/DoJ resolution and Lipitor launch prospects. Given
the absence of ftfs, Ranb results should give perspective
on the strength of its base business. 2) Sun’s execution
on its lofty 28-30% sales growth guidance for F12. 3)
Cipla’s scale up of Indore SEZ and EU inhaler update. 4)
DRRD’s progress in EMs (esp India and Russia), US
pipeline and F13 guidance. 5) While INR has sharply
depreciated by 9.5% (versus USD) during the quarter to
Rs48.97; the AVERAGE qoq depreciation is just 2.4%
(Exhibit 9); implying that the real benefit of forex
(adjusted for hedges) will be felt in the Dec’11 quarter.
Our pecking order in the sector remains unchanged
– DRRD, Lupin, Sun and Ranb (all OW). We retain EW
on Cipla, GSK and Biocon. The sector is trading at 20x
and 16.5x F12 and F13 EPSe (20% EPS CAGR).
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